Addus HomeCare: Capitalizing on Consolidation in Fragmented Industry

Aman Budhwar of PenderFund Capital Management presented his investment thesis on Addus HomeCare (Nasdaq: ADUS) at Wide-Moat Investing Summit 2025.

Thesis summary:

Addus HomeCare is a well-positioned provider of home-based care services, serving approximately 45,600 patients across 23 U.S. states. Founded in 1979 and managed by the current team since 2016, Addus specializes in personal care, hospice, and home health segments. The company benefits from favorable long-term trends, including an aging U.S. population, increasing preference for cost-effective home-based care solutions, and a healthcare landscape shifting towards managed care, which favors larger, experienced providers. With 84% of its revenues from government programs, Addus enjoys a non-discretionary, stable demand profile.

The company’s personal care segment, constituting roughly three-quarters of total revenue and profit, has consistently delivered high-single-digit organic growth, supported by favorable pricing dynamics and margin improvements. Recent acquisitions, including the notable $350 million purchase of Gentiva’s personal care business at 6.5x EV/EBITDA multiple, have further solidified Addus’s market-leading position. While hospice operations experienced temporary disruptions during the COVID-19 pandemic, a recovery is underway, supported by leadership enhancements and increasing integration with the home health segment.

Despite regulatory concerns around Medicaid reimbursements and healthcare policy, Addus faces limited exposure to major risks, as management expects regulatory changes to be either neutral or beneficial. Its geographically diversified footprint further mitigates potential state-level funding risks. Operational efficiency, disciplined capital allocation, and accretive acquisitions underpin its sustainable growth strategy.

From a valuation perspective, Addus recently traded at approximately $115 per share, implying substantial upside to an estimated intrinsic value of $147 per share, based on a discounted cash flow analysis incorporating conservative mid-single-digit growth assumptions and margin expansion driven by operating leverage. With additional potential from prudent acquisitions and its strong defensive earnings profile, Addus represents an appealing investment opportunity with a clear growth runway and manageable risk profile.

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About the instructor:

Aman Budhwar is a Portfolio Manager at PenderFund Capital Management, a firm he joined in February 2022. Aman is passionate about capital markets and has over 25 years of experience in the field of global and emerging market equity research, analysis and stock-picking. Prior to joining Pender, Aman held Senior Equity Analyst positions at leading Canadian fund and asset management firms. Prior to that, he began his career as an Investment Correspondent for India’s leading business daily, where he wrote full-page cover pieces that helped establish a loyal readership. He also worked with a domestic stockbroker in Mumbai before immigrating to Canada in 2001. Throughout his career, Aman has pursued investment opportunities with a long term, differentiated view. He takes a methodical approach to investing and likes to assess both the potential bull and bear cases as well as the probability of each before committing capital to an investment. Over the years, he has developed a process to help identify long term compounders by focusing on key attributes such as a sustainable competitive advantage, high returns on capital, and an attractive free cash flow yield. Aman holds a Bachelor of Commerce from Garhwal University in India and an MBA from the Institute of Management Technology in India. He earned his Chartered Financial Analyst (CFA) designation in 2004. In his free time, he enjoys an active lifestyle, traveling and spending time with his family.

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